Investors Met With Slowing Returns on Capital At Canadian General Medical Center Complex (TADAWUL:9518)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at Canadian General Medical Center Complex (TADAWUL:9518) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Canadian General Medical Center Complex, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.16 = ر.س16m ÷ (ر.س110m - ر.س8.9m) (Based on the trailing twelve months to June 2023).

Thus, Canadian General Medical Center Complex has an ROCE of 16%. That's a relatively normal return on capital, and it's around the 15% generated by the Healthcare industry.

Check out our latest analysis for Canadian General Medical Center Complex

Historical performance is a great place to start when researching a stock so above you can see the gauge for Canadian General Medical Center Complex's ROCE against it's prior returns. If you'd like to look at how Canadian General Medical Center Complex has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Canadian General Medical Center Complex's ROCE Trending?

Over the past two years, Canadian General Medical Center Complex's ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Canadian General Medical Center Complex in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

What We Can Learn From Canadian General Medical Center Complex's ROCE

In summary, Canadian General Medical Center Complex isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Since the stock has gained an impressive 49% over the last year, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

If you want to continue researching Canadian General Medical Center Complex, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Canadian General Medical Center Complex may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.